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Stride’s Career Learning Business Continues to Drive Growth

April 19, 2022

HERNDON, Va.--(BUSINESS WIRE)-- Stride, Inc. (NYSE: LRN), one of the nation’s leading technology-based education companies, today announced its results for the third fiscal quarter ended March 31, 2022.

Third Quarter Fiscal 2022 Highlights Compared to 2021

  • Revenue of $421.7 million, compared with $392.1 million, driven by strong enrollment trends, continued growth in Adult Learning, and increases in revenue per enrollment.
  • Income from operations of $60.6 million, compared with $38.6 million, due to improved gross margins and lower selling, general and administrative expenses.
  • Net income of $42.9 million, compared with $23.8 million.
  • Diluted net income per share of $1.02, compared with $0.57.
  • Adjusted operating income of $69.4 million, compared with $54.9 million. (1)
  • Adjusted EBITDA of $90.3 million, compared with $75.0 million. (1)

Third Quarter Fiscal 2022 Summary Financial Metrics

Three Months Ended March 31, Change 2022/2021

2022

 

2021

 

 

$

 

%

(In thousands, except percentages and per share data)
Revenues $

421,722

392,145

$

29,577

7.5%

 
Income from operations

60,594

38,553

22,041

57.2%

Adjusted operating income (1)

69,440

54,906

14,534

26.5%

 
Net income

42,919

23,789

19,130

80.4%

Net income per share, diluted

1.02

0.57

0.45

78.9%

 
EBITDA (1)

84,731

62,153

22,578

36.3%

Adjusted EBITDA (1)

90,307

75,007

15,300

20.4%

Nine Month Fiscal 2022 Highlights Compared to 2021

  • Revenue of $1,231.5 million, compared with $1,139.3 million.
  • Income from operations of $110.5 million, compared with $89.1 million.
  • Net income of $79.0 million, compared with $61.0 million.
  • Diluted net income per share of $1.87, compared with $1.46.
  • Adjusted operating income of $134.7 million, compared with $128.0 million. (1)
  • Adjusted EBITDA of $198.5 million, compared with $184.9 million. (1)

Nine Month Fiscal 2022 Summary Financial Metrics

Nine Months Ended March 31, Change 2022/2021

2022

 

2021

 

 

$

 

%

(In thousands, except percentages and per share data)
Revenues $

1,231,455

1,139,250

$

92,205

8.1%

 
Income from operations

110,532

89,069

21,463

24.1%

Adjusted operating income (1)

134,693

127,965

6,728

5.3%

 
Net income

79,040

60,956

18,084

29.7%

Net income per share, diluted

1.87

1.46

0.41

28.1%

 
EBITDA (1)

183,996

154,107

29,889

19.4%

Adjusted EBITDA (1)

198,460

184,928

13,532

7.3%

(1)

To supplement our financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we also present non-GAAP financial measures including adjusted operating income, EBITDA and adjusted EBITDA. Management believes that these additional metrics provide useful information to investors relating to our financial performance. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Revenue and Enrollment Data

Revenue

The following table sets forth the Company’s revenues for the periods indicated:

Three Months Ended Nine Months Ended
March 31, Change 2022 / 2021 March 31, Change 2022 / 2021

2022

 

2021

 

$

 

%

 

2022

 

2021

 

$

 

%

(In thousands, except percentages)
 
General Education $

315,858

$

322,304

$

(6,446

)

(2.0

%)

$

935,440

$

950,142

$

(14,702

)

(1.5

%)

Career Learning
Middle - High School

83,238

52,382

30,856

 

58.9

%

229,937

152,529

77,408

 

50.7

%

Adult

22,626

17,459

5,167

 

29.6

%

66,078

36,579

29,499

 

80.6

%

Total Career Learning

105,864

69,841

36,023

 

51.6

%

296,015

189,108

106,907

 

56.5

%

Total Revenues $

421,722

$

392,145

$

29,577

 

7.5

%

$

1,231,455

$

1,139,250

$

92,205

 

8.1

%

Enrollment Data

The following table sets forth total enrollment data for students in our General Education and Career Learning lines of revenue. Enrollments for General Education and Career Learning include those students in full service public or private programs where Stride provides a combination of curriculum, technology, instructional and support services inclusive of administrative support.

Three Months Ended Change Nine Months Ended Change
March 31, 2022 / 2021 March 31, 2022 / 2021

2022

 

2021

 

#

 

%

 

2022

 

2021

 

#

 

%

(In thousands, except percentages)
 
General Education (1)

143.8

155.8

(12.0

)

(7.7

%)

145.1

159.4

(14.3

)

(9.0

%)

Career Learning (1)(2)

42.0

29.5

12.5

 

42.4

%

41.9

30.0

11.9

 

39.7

%

Total Enrollment

185.8

185.3

0.5

 

0.3

%

187.0

189.4

(2.4

)

(1.3

%)

(1)

This data includes enrollments for which Stride receives no public funding or revenue.

(2)

No enrollments are included in Career Learning for Galvanize, Tech Elevator or MedCerts.

Revenue per Enrollment Data

The following table sets forth revenue per average enrollment data for students for the period indicated. If the mix of enrollments changes, our revenues will be impacted to the extent the average revenues per enrollments are significantly different.

Three Months Ended Change Nine Months Ended Change
March 31, 2022 / 2021 March 31, 2022 / 2021

2022

 

2021

 

#

 

%

 

2022

 

2021

 

#

 

%

 
General Education $

2,006

$

1,876

$

130

6.9%

$

5,867

$

5,384

$

483

9.0%

Career Learning

1,981

1,759

222

12.6%

5,463

5,033

430

8.5%

Cash Flow and Capital Allocation

As of March 31, 2022, the Company’s cash and cash equivalents totaled $308.6 million, compared with $386.1 million reported at June 30, 2021, in line with normal seasonal trends.

Capital expenditures for the first nine months of fiscal 2022 were $47.9 million, compared to $34.9 million in the first nine months of fiscal 2021, and were comprised of $4.7 million of property and equipment, $30.8 million of capitalized software development, and $12.4 million of capitalized curriculum development.

Fiscal Year 2022 Outlook

The Company is updating and raising its forecast for the full fiscal year 2022:

  • Revenue in the range of $1.645 billion to $1.660 billion.
  • Capital expenditures in the range of $65 million to $70 million. Note that capital expenditures include the purchase of property and equipment, capitalized software, and curriculum development costs as defined on our Statement of Cash Flows.
  • Effective tax rate of 27% to 29%.
  • Adjusted operating income in the range of $180 million to $185 million. (1)

(1)

In addition to providing an outlook for revenue and capital expenditures, adjusted operating income is provided as a supplemental non-GAAP financial measure as management believes that it provides useful information to our investors. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below. Please also see Special Note on Forward Looking Statements below.

Conference Call

The Company will discuss its third quarter fiscal year 2022 financial results during a conference call scheduled for Tuesday, April 19, 2022 at 5:00 p.m. eastern time (ET).

A live webcast of the call will be available at https://events.q4inc.com/attendee/550949613. To participate in the live call, investors and analysts should dial (888) 210-2831 (domestic) or 1 (289) 514-2968 (international) at 4:45 p.m. ET. The conference ID number is 4812941. Please access the website at least 15 minutes prior to the start of the call.

A replay of the call will be available starting on April 19, 2022 at 8:00 p.m. ET through May 19, 2022 at 8:00 p.m. ET by dialing (800) 770- 2030 (domestic) or 1 (647) 362 9199 (international) and entering the conference ID 4812941. A webcast replay will be available at https://events.q4inc.com/attendee/550949613 for 30 days.

About Stride Inc.

At Stride, Inc. (NYSE: LRN) we are reimagining learning – where learning is lifelong, deeply personal, and prepares learners for tomorrow. The company has transformed the teaching and learning experience for millions of people by providing innovative, high-quality, tech-enabled education solutions, curriculum, and programs directly to students, schools, the military, and enterprises in primary, secondary, and post-secondary settings. Stride is a premier provider of K-12 education for students, schools, and districts, including career learning services through middle and high school curriculum. For adult learners, Stride delivers professional skills training in healthcare and technology, as well as staffing and talent development for Fortune 500 companies. Stride has delivered millions of courses over the past decade and serves learners in all 50 states and more than 100 countries. The company is a proud sponsor of the Future of School, a nonprofit organization dedicated to closing the gap between the pace of technology and the pace of change in education. More information can be found at stridelearning.com, K12.com, galvanize.com, techelevator.com, and medcerts.com.

Special Note on Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have tried, whenever possible, to identify these forward-looking statements using words such as “anticipates,” “believes,” “estimates,” “continues,” “likely,” “may,” “opportunity,” “potential,” “projects,” “will,” “expects,” “plans,” “intends” and similar expressions to identify forward looking statements, whether in the negative or the affirmative. These statements reflect our current beliefs and are based upon information currently available to us. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties, factors and contingencies include, but are not limited to: reduction of per pupil funding amounts at the schools we serve; inability to achieve a sufficient level of new enrollments to sustain our business model; limitations of the enrollment data we present, which may not fully capture trends in the performance of our business; failure to enter into new school contracts or renew existing contracts, in part or in their entirety; failure of the schools we serve or us to comply with federal, state and local regulations, resulting in a loss of funding, an obligation to repay funds previously received, or contractual remedies; governmental investigations that could result in fines, penalties, settlements, or injunctive relief; declines or variations in academic performance outcomes of the students and schools we serve as curriculum standards, testing programs and state accountability metrics evolve; harm to our reputation resulting from poor performance or misconduct by operators or us in any school in our industry and/or in any school in which we operate; legal and regulatory challenges from opponents of virtual public education or for-profit education companies; changes in national and local economic and business conditions and other factors, such as natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as coronavirus disease 2019 (“COVID-19”); discrepancies in interpretation of legislation by regulatory agencies that may lead to payment or funding disputes; termination of our contracts, or a reduction in the scope of services, with schools; failure to develop the career readiness education business; entry of new competitors with superior technologies and lower prices; unsuccessful integration of mergers, acquisitions and joint ventures; failure to further develop, maintain and enhance our technology, products, services and brands; inadequate recruiting, training and retention of effective teachers and employees; infringement of our intellectual property; disruptions to our Internet-based learning and delivery systems, including, but not limited to, our data storage systems, resulting from cybersecurity attacks; misuse or unauthorized disclosure of student and personal data; and failure to prevent a cybersecurity incident that affects our systems; and other risks and uncertainties associated with our business described in the Company’s filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this presentation is as of today’s date, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

Financial Statements

The financial statements set forth below are not the complete set of Stride Inc.’s financial statements for the three and nine months ended March 31, 2022 and are presented below without footnotes. Readers are encouraged to obtain and carefully review Stride Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, including all financial statements contained therein and the footnotes thereto, filed with the SEC, which may be retrieved from the SEC’s website at www.sec.gov or from Stride Inc.’s website at www.stridelearning.com.

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended
March 31, March 31,

2022

 

 

2021

 

 

2022

 

 

2021

 

(In thousands except share and per share data)
Revenues $

421,722

 

$

392,145

 

$

1,231,455

 

$

1,139,250

 

Instructional costs and services

266,883

 

253,128

 

802,657

 

740,951

 

Gross margin

154,839

 

139,017

 

428,798

 

398,299

 

Selling, general, and administrative expenses

94,245

 

100,464

 

318,266

 

309,230

 

Income from operations

60,594

 

38,553

 

110,532

 

89,069

 

Interest expense, net

(2,373

)

(5,371

)

(6,241

)

(12,502

)

Other income, net

496

 

486

 

4,291

 

2,276

 

Income before income taxes and income from equity method investments

58,717

 

33,668

 

108,582

 

78,843

 

Income tax expense

(16,716

)

(10,275

)

(29,751

)

(18,541

)

Income from equity method investments

918

 

396

 

209

 

654

 

Net income attributable to common stockholders $

42,919

 

$

23,789

 

$

79,040

 

$

60,956

 

Net income attributable to common stockholders per share:
Basic $

1.03

 

$

0.59

 

$

1.91

 

$

1.52

 

Diluted $

1.02

 

$

0.57

 

$

1.87

 

$

1.46

 

Weighted average shares used in computing per share amounts:
Basic

41,823,564

 

40,286,109

 

41,302,789

 

40,143,610

 

Diluted

42,136,042

 

41,690,509

 

42,351,877

 

41,701,955

 

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 
March 31, June 30,

2022

 

 

2021

 

(audited)
(In thousands except share and per share data)
ASSETS
Current assets
Cash and cash equivalents $

308,564

 

$

386,080

 

Accounts receivable, net of allowance of $20,641 and $21,384

422,615

 

369,303

 

Inventories, net

23,986

 

39,690

 

Prepaid expenses

35,861

 

19,453

 

Other current assets

80,553

 

43,004

 

Total current assets

871,579

 

857,530

 

Operating lease right-of-use assets, net

87,516

 

94,671

 

Property and equipment, net

67,565

 

72,069

 

Capitalized software, net

64,921

 

57,308

 

Capitalized curriculum development costs, net

50,476

 

50,376

 

Intangible assets, net

91,940

 

99,480

 

Goodwill

240,952

 

240,353

 

Deposits and other assets

99,583

 

105,510

 

Total assets $

1,574,532

 

$

1,577,297

 

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $

32,848

 

$

62,144

 

Accrued liabilities

55,152

 

77,642

 

Accrued compensation and benefits

59,843

 

80,363

 

Deferred revenue

51,530

 

38,110

 

Current portion of finance lease liability

37,016

 

27,336

 

Current portion of operating lease liability

13,790

 

20,649

 

Total current liabilities

250,179

 

306,244

 

Long-term finance lease liability

37,566

 

41,568

 

Long-term operating lease liability

76,342

 

77,458

 

Long-term debt

411,047

 

299,271

 

Deferred tax liability

9,034

 

31,853

 

Other long-term liabilities

9,794

 

16,255

 

Total liabilities

793,962

 

772,649

 

Commitments and contingencies
Stockholders’ equity
 
Preferred stock, par value $0.0001; 10,000,000 shares authorized; zero shares issued or outstanding

 

 

Common stock, par value $0.0001; 100,000,000 shares authorized; 48,102,945 and 46,911,527 shares issued; and 42,768,202 and 41,576,784 shares outstanding, respectively

4

 

4

 

Additional paid-in capital

683,892

 

795,449

 

Accumulated other comprehensive income (loss)

(216

)

(474

)

Retained earnings

199,372

 

112,151

 

Treasury stock of 5,334,743 shares at cost

(102,482

)

(102,482

)

Total stockholders’ equity

780,570

 

804,648

 

Total liabilities and stockholders' equity $

1,574,532

 

$

1,577,297

 

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

March 31,

2022

 

 

2021

 

(In thousands)
Cash flows from operating activities
Net income $

79,040

 

$

60,956

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense

73,464

 

65,038

 

Stock-based compensation expense

14,464

 

30,821

 

Deferred income taxes

6,572

 

2,256

 

Provision for doubtful accounts

7,047

 

7,635

 

Amortization of discount and fees on debt

1,182

 

8,737

 

Noncash operating lease expense

15,084

 

14,573

 

Other

4,675

 

7,883

 

Changes in assets and liabilities:
Accounts receivable

(56,072

)

(197,659

)

Inventories, prepaid expenses, deposits and other current and long-term assets

7,967

 

(27,798

)

Accounts payable

(26,761

)

(913

)

Accrued liabilities

(14,630

)

8,850

 

Accrued compensation and benefits

(20,652

)

14,913

 

Operating lease liability

(15,899

)

(15,650

)

Deferred revenue and other liabilities

5,922

 

31,480

 

Net cash provided by operating activities

81,403

 

11,122

 

Cash flows from investing activities
Purchase of property and equipment

(4,734

)

(2,967

)

Capitalized software development costs

(30,837

)

(20,189

)

Capitalized curriculum development costs

(12,361

)

(11,742

)

Sale of long-lived assets

 

223

 

Sale of other investments

5,261

 

 

Acquisition of MedCerts, LLC, net of cash acquired

 

(54,795

)

Acquisition of Tech Elevator, Inc., net of cash acquired

 

(16,030

)

Other acquisitions, loans and investments, net of distributions

(3,654

)

(1,008

)

Proceeds from the maturity of marketable securities

19,904

 

 

Purchases of marketable securities

(64,151

)

 

Net cash used in investing activities

(90,572

)

(106,508

)

Cash flows from financing activities
Repayments on finance lease obligations

(23,919

)

(17,103

)

Repayments on credit facility

 

(100,000

)

Issuance of convertible senior notes, net of issuance costs

 

408,610

 

Purchases of capped calls in connection with convertible senior notes

 

(60,354

)

Payments of deferred purchase consideration

(7,858

)

 

Proceeds from exercise of stock options

391

 

724

 

Withholding of stock options for tax withholding

 

(10,885

)

Repurchase of restricted stock for income tax withholding

(37,463

)

(8,872

)

Net cash provided by (used in) financing activities

(68,849

)

212,120

 

Net change in cash, cash equivalents and restricted cash

(78,018

)

116,734

 

Cash, cash equivalents and restricted cash, beginning of period

386,582

 

213,299

 

Cash, cash equivalents and restricted cash, end of period $

308,564

 

$

330,033

 

 
Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of March 31st:
Cash and cash equivalents $

308,564

 

$

329,031

 

Other current assets (restricted cash)

 

502

 

Deposits and other assets (restricted cash)

 

500

 

Total cash, cash equivalents and restricted cash $

308,564

 

$

330,033

 

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP, we have presented adjusted operating income, EBITDA, and adjusted EBITDA, which are not presented in accordance with GAAP.

  • Adjusted operating income (loss) is defined as income (loss) from operations as adjusted for stock-based compensation and the amortization of intangible assets.
  • EBITDA is defined as income (loss) from operations as adjusted for depreciation and amortization.
  • Adjusted EBITDA is defined as income (loss) from operations as adjusted for stock-based compensation and depreciation and amortization.
  • Adjusted EBITDA and adjusted operating income (loss) exclude stock-based compensation, which consists of expenses for stock options, restricted stock, restricted stock units, and performance stock units.

Management believes that the presentation of these non-GAAP financial measures provides useful information to investors relating to our financial performance. Adjusted operating income (loss) and Adjusted EBITDA remove stock-based compensation, which is a non-cash charge that varies based on market volatility and the terms and conditions of the awards. EBITDA and Adjusted EBITDA remove depreciation and amortization, which can vary depending upon accounting methods and the book value of assets. EBITDA and Adjusted EBITDA provide a measure of corporate performance exclusive of capital structure and the method by which assets were acquired.

Our management uses these non-GAAP financial measures:

  • as additional measures of operating performance because they assist us in comparing our performance on a consistent basis; and
  • in presentations to the members of our Board of Directors to enable our Board to review the same measures used by management to compare our current operating results with corresponding prior periods.

Other companies may define these non-GAAP financial measures differently and, as a result, our use of these non-GAAP financial measures may not be directly comparable to similar non-GAAP financial measures used by other companies. Although we use these non-GAAP financial measures to assess the performance of our business, the use of non-GAAP financial measures is limited as they include and/or do not include certain items not included and/or included in the most directly comparable GAAP financial measure.

These non-GAAP financial measures should be considered in addition to, and not as a substitute for, revenues, income (loss), net income (loss) and net income (loss) per share or other related financial information prepared in accordance with GAAP. Adjusted EBITDA is not intended to be a measure of liquidity. You are cautioned not to place undue reliance on these non-GAAP financial measures.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Third Quarter Fiscal 2022

Three Months Ended Nine Months Ended
March 31, March 31,

 

2022

 

 

2021

 

 

2022

 

 

2021

(In thousands)
Income from operations

$

60,594

$

38,553

$

110,532

$

89,069

Stock-based compensation expense

 

5,576

 

12,854

 

14,464

 

30,821

Amortization of intangible assets

 

3,270

 

3,499

 

9,697

 

8,075

Adjusted operating income

 

69,440

 

54,906

 

134,693

 

127,965

Depreciation and other amortization

 

20,867

 

20,101

 

63,767

 

56,963

Adjusted EBITDA

$

90,307

$

75,007

$

198,460

$

184,928

 
EBITDA

$

84,731

$

62,153

$

183,996

$

154,107

Fiscal Year 2022 Outlook

Year Ended
June 30, 2022
Low High
(In millions)
Income from operations

$

148.0

$

151.0

Stock-based compensation expense

 

19.0

 

21.0

Amortization of intangible assets

 

13.0

 

13.0

Adjusted operating income

$

180.0

$

185.0

 

Investors
Timothy Casey
Vice President, Investor Relations
Stride, Inc.
tcasey@k12.com

Source: Stride, Inc.

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